Cost & Coverage
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Everything you need to know about homeowners insurance in The Golden State.
California is known for its stunning coastline, its national parks, and its massive economy. The Golden State’s varying geographical terrain and climate can also result in some pretty bad wildfires, earthquakes, floods, and landslides. If you’re a homeowner in California, you should make sure your home is well protected with homeowners insurance.
In this article:
|Insurance company||Avg Policy Cost||Market Share||A.M. Best Rating|
Methodology: Market share and policy cost data courtesy of the California Department of Insurance (CDI). Average policy cost for each insurer is based on a 15- to 25-year-old home in Santa Clara County with an insured value of $300,000 and a $1,000 deductible.
Coverage and claims: USAA - USAA is a great option for members of the military, veterans, and their families due to their low rates and extra perks. USAA also has excellent financial ratings and features the most comprehensive coverage in the California market. But USAA’s excellence isn’t limited to just their coverage — this company ensures a fair and smooth claims process as well. If you insure your home with USAA, look into their earthquake endorsement, which you can add to any USAA policy for a small additional premium.
Low rates: Allstate - When it comes to rates, Allstate has some of the lowest in the industry. Allstate also features a number of discount opportunities. If you bundle your home and auto insurance, you can save up to 30% on your policies and up to 20% if you’ve never filed an insurance claim.
Digital tools: Travelers - The property and casualty insurance industry is often accused of being stuck in the dark ages, but don’t blame Travelers. With Travelers, you’re eligible to receive a free Amazon Echo Dot when you begin a new policy. You can take advantage of their Amazon affiliation some more by purchasing certain smart-home devices at discounted rates. This program not only protects your home, but it may also lower your insurance rates by as much as 20%.
Additional coverages: Nationwide - Owning a home in California often means insuring your home against perils that a standard policy typically doesn’t cover, like earthquakes and floods. Very few companies are equipped to address your additional coverage needs as well as Nationwide. Featuring additional insurance options for earthquakes and floods, Nationwide offers personal-valuables endorsements that both broaden your coverage and increase itemized sublimits.
New homebuyers: State Farm - If you’re a first-time homebuyer and you’ve never dealt with an insurance company before, State Farm may be a good jumping off point for you. State Farm has great educational tools on their website, an excellent app where you can pay your bill and file claims, and provides the easiest home insurance experience in the California market.
Homeowners insurance is one of the more reasonably priced necessities for California residents. That’s in large part due to the large carrier pool and the fact that insurers offload liability for expensive risks to surplus carriers (like flood, earthquakes, and in some cases, wildfires).
Average premium data also doesn’t include all the costly supplemental coverages you may need as a California property owner. As of 2015, the average annual premium in California was $986 — less than the national average of $1,173, according to the Insurance Information Institute.
If you own a home in California, the amount you pay for insurance will be impacted by the following:
For supplemental coverage against earthquakes, floods, and wildfires, cost is going to vary depending on whether you’re buying it from a private broker or the government. Check with your insurer to see if they offer an endorsement or policy for whatever coverage gap you need filled, and if they don’t, see if they can point you toward an insurer who does. Private market policies generally cost less than the “last-resort” policies offered by the government.
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Homeowners insurance isn’t required by law in California, but if you have a mortgage, your lender will require you to get at least some form of coverage.
Generally, your lender will require a minimum amount of “hazard” insurance, which is another way of saying a homeowners insurance policy. If you live in an area prone to floods, mudslides and landslides, earthquakes, or wildfires, your lender may specify that you acquire additional coverage to protect your home against those risks.
Your policy’s dwelling coverage is your home’s insured value — this is the part of your policy that reimburses you when your home is damaged by a covered peril. Before you’re reimbursed for a dwelling coverage claim, you first need to pay your deductible. There are two types of deductibles: dollar-amount deductible for most perils, and percentage deductibles for earthquakes and wildfire damage.
Your other structures coverage reimburses you for covered losses to structures not directly attached to your home. Fences, detached garages, sheds, and gazebos all count as “other structures.” Your other structures coverage may also be subject to a wildfire deductible.
Your personal property coverage is typically 50% of your home’s insured value and covers the contents of your home up to your personal property coverage limit. Your personal property coverage typically only covers “named perils,” and you’re generally only reimbursed the actual cash value of items worth under a standard policy.
Replacement cost value personal property reimbursements are typically offered by insurers for an additional premium.
Some types of personal property – like jewelry, vintage instruments, furs, or expensive keepsakes – have sublimits and are typically only covered up to $1,500 per damaged or stolen item. Sublimits can be increased with a scheduled valuables endorsement or rider.
Be sure to take an inventory of all of your personal belongings inside the home, value it, and calculate what it would cost to repair or replace your stuff if they’re damaged, destroyed, or stolen by a covered loss.
Loss-of-use coverage, or your “additional living expenses,” pays for your living expenses if a covered peril displaces you from your home and makes it uninhabitable. In some cases, your loss-of-use coverage may be needed for a year or longer if your home incurs a total loss and you need to live somewhere else while it’s rebuilt.
Loss-of-use is typically 20% of your home’s dwelling coverage, but your insurer may let you increase your coverage limits.
Liability coverage protects your assets if someone is injured in your home and sues you. It also provides coverage for you if you accidentally cause damage to someone else’s personal property. Most liability limits are anywhere from $100,000 to $500,000.
Covers guests’ medical bills if they’re injured in your home. Medical payments coverage is generally anywhere from $1,000 to $5,000.
The probability of a severe earthquake in California is pretty high. In fact, a 7.0 magnitude or more quake occurs at least once every ten years, according to the California Department of Insurance. Add to that fact that most Californians live within at least 30 miles of a fault, and earthquake insurance seems like an absolute necessity.
However, only about one in 10 California homeowners have earthquake insurance, according to the National Association of Insurance Commissioners (NAIC). There’s a couple possible reasons for this: earthquake insurance isn’t required by mortgage lenders like home insurance and in some cases flood insurance is, so homeowners don’t see it as a pressing concern. Earthquake insurance can also cost as much as $4,000 a year in certain parts of the state.
The amount you pay for earthquake insurance largely depends on your home’s location. Its build (frame or masonry), age, and your foundation-type (slab or raised) are also significant rating factors. Brick homes, for example, cost almost $2,000 more a year to insure than frame homes, according to a sample quote we obtained through the California Earthquake Authority (CEA). That’s because frame homes are more bendable and flexible when confronted with seismic activity than masonry homes.
Most California homeowners acquire earthquake insurance through the California Earthquake Authority, a publicly managed organization that sells earthquake coverage through private companies across the state. Many private companies also offer earthquake endorsements which you can add to your home insurance policy for an additional premium.
Earthquake deductibles are anywhere from 5% to 25% of your home’s insured value. You can keep your premiums down by electing for a higher-percentage deductible. The CEA also offers pretty generous discounts for homeowners who retrofit their home with earthquake protection.
As wildfires in California become bigger and more expensive to insure, some insurers have stopped writing policies or refused to renew policies for homes in wildfire-prone regions of the state. Insurers who do still write in wildfire areas may exclude wildfire damage from coverage or charge a separate wildfire deductible.
If your insurer recently cancelled your policy and you can’t find insurance on the open market, you’re eligible for a California FAIR Plan. FAIR Plan policies are generally more expensive than comparable private insurance policies and have limited coverage. To supplement your FAIR plan and make sure your home is fully protected, you’ll need a “difference in conditions” (DIC) policy. The California Department of Insurance has a list of major insurers who write DIC policies.
Don’t let the state’s perpetual drought fool you — California homes are often at risk of flood damage too. California floods have a number of causes: coastal floods, floods caused by landslides and mudslides, and fluvial floods, to name a few. And as the effects of climate change and El Niño become more common, coastal and inland flooding are only expected to worsen in the Golden State.
Whether your home is situated on the coast or in a valley, if you live in a FEMA-designated flood zone, you may want to look into private flood coverage or a National Flood Insurance Program (NFIP) policy. Even if you don’t live in a flood zone, you may want to consider flood coverage anyway.
Mudslides are covered by NFIP flood policies and may also be covered by your private flood policy. But, like floods, mudslides are excluded from your homeowners insurance policy.
If the mudslide occurred because of a covered peril, like sediment runoff from a wildfire, your insurer may determine that the wildfire was the “efficient proximate cause” of the mudslide and reimburse you for the damages. In fact, the California Insurance Commission recently issued a notice to insurance companies that overrides the mudslide exclusion if the proximate cause was fire.
Like earthquakes, landslides are considered “earth movement” perils and are excluded from home insurance. But since landslides aren’t caused by seismic activity, they’re not covered by earthquake insurance either. In fact, there doesn’t seem to be too much of a market for landslide coverage. If you’re concerned about losing your home to a landslide, your best bet may be to ask around and see if an insurer offers “difference in condition” landslide insurance.
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